Steve Ballmer Was No Tech Visionary

By Vinayak on Tuesday, September 3, 2013 with 0 comments

When Microsoft Corp (NASDAQ: MSFT) was riding high, employees would either be referred to as a 'Bill guy' or a 'Steve guy'. In Microsoft-speak, a 'Bill guy' was a tech genius like Bill Gates and a 'Steve guy' was big on sales and marketing like Steve Ballmer. When SteveB as he came to be known at Microsoft took over from Gates in January 2000, it seemed like the sales and marketing people at the world's largest software company had triumphed. Unfortunately, for Ballmer he became CEO a few weeks before the stock bubble burst and Microsoft's stock price has since never recovered.

Now that Steve Ballmer is on his way out let's look at some of his misses and miscues. And what better way than to use the words from the horse's mouth itself.

Move to mobile

"$500, fully subsidized, with a plan! That is the most expensive phone in the world and it doesn't appeal to business customers, because it doesn't have a keyboard, which makes it not a very good email machine." - Ballmer in a TV interview just after the iPhone was launched in 2007.

Ballmer knew little then that the iPhone would generate more revenue than the entirety of Microsoft's product lineup from June 2011 to June 2012. It was smartphones that proved to be the last frontier for Microsoft.

To Ballmer's credit, Windows Mobile was debuted on April 19, 2000, but it did not come close to superiority of the iPhone or the iPad. And then there was the deal that Microsoft made with Nokia (NYSE: NOK), but that should have come much earlier.

“I don’t think anybody has done a product that is the product that I see customers wanting. You can go through the products from all those guys … and none of them has a product that you can really use. Not Apple. Not Google. Not Amazon. Nobody has a product that lets you work and play that can be your tablet and your PC. Not at any price point. … [Surface] is a first-class tablet that people can enjoy and appreciate.” - Ballmer in a 2012 interview with CNBC.

Ballmer has been an irrepressible pitchman, but what these sales and marketing guys need to realize is that a great product is what is ultimately going to sell. It is true that the Microsoft Surface's hardware was widely praised, but the software and overall experience got mixed reviews. TechCrunch, Matt Buchanan at Buzzfeed, and Gizmodo recommended not to buy the so-called iPad killer. Gizmodo brought up the high price tag and stated that it was inferior to the iPad.

Just last month, Steve Ballmer admitted that the Surface tablet hadn't sold as well as he hoped and Microsoft had made a $900M loss in the previous quarter as a result. The poor sales were to be expected given the market dominance of, Inc. (NASDAQ: AMZN) and Apple Inc. (NASDAQ: AAPL). Apple Inc has sold 100M iPads in just over two years. And the Amazon Kindle Fire is only the best-selling Amazon product ever.  

Search engine

“In the coming years, we’ll make progress against Google in search first by upping the ante in R&D through organic innovation and strategic acquisitions. Second, we will out-innovate Google in key areas — we’re already seeing this in our maps and news search. Third, we are going to reinvent the search category through user experience and business model innovation.” - Ballmer on a letter to Microsoft employees in 2008.

Back in the early days of the internet, there was a browser war that was fought to establish control of the web. Again, Internet Explorer had the early lead. However, it was faced with antitrust suits that are strikingly similar to what Google Inc (NASDAQ: GOOG) and Apple are fighting now. These lawsuits served as a distraction for Microsoft that took its eye of the ball and Google emerged with its search products and search based ad sales. Microsoft has always struggled to compete with Google in the flourishing online ads market.

Google is clearly a monopoly in this sphere and Microsoft's Bing is fighting a losing battle.  Google has provided more relevant information through its higher quality search engine results page [SERP]. Additionally, Google's instant search is faster. I have measured this many a time. For instance, I began typing "latest Rangers score" into both engines. Google provided this as a possible query result after only "latest Rang", while Bing needed "latest Rangers s" to be typed up.

Nonetheless, Bing does have better visual appeal, but this doesn't change the fact that Google is the web's biggest, most favored search engine.

Portable Music

“No, I do not [have an iPod]. Nor do my children. My children — in many dimensions they’re as poorly behaved as many other children, but at least on this dimension I’ve got my kids brainwashed — you don’t use Google and you don’t use an iPod.” - Ballmer in a 2006 interview with Fortune magazine.

The thing with Microsoft is that it has always been a great software company, but it has failed time and again on the hardware front. Its inability to win in the portable music market after another early lead proves this.

It is a well-known fact that Apple was in an ostensibly  irreversible death spiral in the late 1990s. On October 23, 2001, the late Steve Jobs pulled out of his left jeans pocket the iPod and so came an unprecedented portable music revolution.

The iPod was wildly successful and it laid the foundation for the iPhone and the iPad. We are now seeing the resurgence of the Mac, which has seen increased sales growth over the last couple of years. Microsoft's answer to the iPod came in the form of the Zune in 2006 and this could be added to Ballmer's long list of failed products during his tenure as CEO.

“It’s the dirt-bike market … we have high share there.” - Ballmer in a 2007 AllThingsD interview.

Again, it was too little, too late. If the Zune had come out at the same time as the iPod, it could have provided some competition. By the time the first Zune was released, the iPod was the de facto portable music player. 

Bottom line: Ballmer will go down as iconic, charismatic CEO

To be fair to Ballmer, his performance over the last decade was better than some stellar CEOs like IBM's Louis V. Gerstner, Jr. and GE's iconic Jack Welch, as measured by total annual profit growth. Ballmer was also highly instrumental in diversifying Microsoft's product mix with the success of the Xbox entertainment and devices division being credited to him.

It may be somewhat unjust to blame Ballmer for Microsoft's steady fall in an era dominated by Google and Apple Inc., but the facts speak for themselves. Microsoft's stock price jumped at the news as shareholders and investors were glad to see the 'sales and marketing' guy finally call it a day.

Category: Stocks



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